Education Finance Lobbying Group Names New Head

One of the main lobbying organizations that represnts loan servicers and other student loan entities has named its new president.

The Education Finance Council on Monday said that Debra J. Chromy would lead the group. Chromy was most recently a vice president at American Student Assistance. She replaces Vince Sampson, who left the council earlier this year to join a law firm.

The group represents nonprofit and state entities that provide student loans, as well as loan servicers, which have increasingly faced scrutiny in Washington over how well they help struggling borrowers avoid default.

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Authorities Investigate 23 for Possible Aid Scheme

Police at the College of Marin, in California, are investigating 23 people who are suspected of pretending to be students to obtain federal student aid, The San Francisco Chronicle reported. Their plot reportedly involved plans to obtain $200,000, and some of the funds have already been paid out.


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Warren Blasts Education Dept. on Loan Servicing Contracts

Senator Elizabeth Warren, the Massachusetts Democrat who has been a leading critic of how the U.S. Department of Education oversees the companies it hires to service federal student loans, indicated Wednesday that she is not satisfied with the department’s effort to overhaul its agreements with those companies. Under pressure from Senate Democrats like Warren, as well as many groups representing students, labor unions, and consumers, the Education Department announced last month that it had renegotiated new contracts with the four main entities it hires to manage payments for federal student loan borrowers.

The new contracts change the payment structure for loan servicers, increasing the rate at which they are paid for accounts in good standing and reducing the amount of money they are paid for delinquent accounts. The servicers will also receive new bonuses if they keep their borrowers’ delinquency rates at certain levels.

At a Senate hearing Wednesday, Warren grilled an Education Department official over the new contracts, asking why the loan servicing companies would be paid more to manage the payments of borrowers in good standing. She cited analysis by Compass Point that showed that Navient, the loan-servicing business that was previously part of Sallie Mae, stood to receive an additional $20 million under the payment structure without making any changes to the health of their portfolio.

Navient has drawn particular scrutiny from Warren and other student and consumer groups. Federal prosecutors earlier this year accused the company of overcharging military service members. It entered into a multimillion-dollar settlement with the Department of Justice, in which it did not admit any wrongdoing.

William Leith, the chief business operations officer for the department’s Federal Student Aid office, said that while the department estimated that the servicers, in aggregate, would receive more money to service loans, the contracts were designed to help borrowers. He said that the Education Department was on track to complete a 120-day review of whether any of its loan servicers, including Navient, had illegally overcharged service member borrowers. That review will be completed in the next several weeks, he said. 

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GAO Urges Pentagon to Better Evaluate Colleges

The U.S. Department of Defense has not done enough to guide the work of the contractor it used to evaluate the quality of colleges where service members enrolled using federal military education funds, the Government Accountability Office said in a report Monday. The Pentagon agreed with the agency's assessment and said it had decided not to renew its agreement with the contractor while it develops a better way of evaluating participating colleges.

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John Oliver Takes on Student Loan Issues

Student loan issues may not seem the ideal topic for comedy, but John Oliver thinks otherwise. Here's a segment on his new show "Last Week Tonight" (and below that you'll see that he highlighted the coverage of a certain higher education publication close to our hearts):



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Families' student loan debt grows, but rate of increase slows

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Federal report shows families' student loan burden grows while other forms of debt decline, but suggests a slight slowing of the rate of increase in families' college-related debt.

Feds Suspect More FAFSA Errors, Will Again Reprocess Forms

For the second time this year, the U.S. Department of Education will reprocess tens of thousands of federal student aid applications because of a decimal place error, officials announced Thursday.The department said that next week it will reprocess "less than 160,000" applications where officials suspect a student may have incorrectly inserted a decimal place into the online application's income box, artificially boosting his or her wealth in the eyes of the federal formula that determines aid.

The misreported adjusted gross income, in some cases, may have led students to be denied for a Pell Grant or have their award reduced from what it should have been had they correctly filled out the Free Application for Federal Student Aid, known as the FAFSA. Some of those errors were caught in July when the department reprocessed 182,155 applications to correct a similar error in the "earned income from work" box, officials said.  Most of those applications, however, involved students appearing qualified for more aid than they should have been. 

In the current batch of reprocessing, department officials said they are targeting applications where a student's adjusted gross income is greater than $100,000 or a parent's adjusted gross income is listed above $500,000. "While meeting these criteria does not mean that an error occurred -- we actually do have students who earn more than $100,000 and parents who earn more than $500,000 -- we believe that it would be prudent for institutions to review these transactions to ensure that the financial information is accurate," the department's announcement said. 

The department on July 1 reprogrammed its online FAFSA form to automatically drop any fractional dollar amounts that are erroneously entered into the system, which accepts only whole numbers, in order to prevent the problem from recurring. 

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U.S. Approval for Wisconsin Competency-Based Program

The U.S. Department of Education last week granted approval to a self-paced, competency-based program from two institutions in the University of Wisconsin System, the system announced Tuesday. The associate of arts and science degree track is a form of competency-based education called direct assessment, which does not rely on the credit-hour standard. The University of Wisconsin Colleges and Extension programs are offering the degree. It's part of the system's broader competency-based offerings, which are dubbed the UW Flexible Option.

Students who enroll in the degree program will now be eligible to receive federal financial aid. Wisconsin is the third institution to receive such approval, and the first public one. The university had submitted an application to the department in January. The feds' long delay in approving another direct assessment degree had caused some confusion among backers of competency-based education. But the department later gave a boost to the emerging model of higher education through its experimental sites program, which grants waivers for colleges to experiment while retaining federal aid eligibility.

U.S. Rep. Mark Pocan, a Wisconsin Democrat, last month wrote to Arne Duncan, the education secretary, urging the department to approve Wisconsin's application. He applauded the news this week in a written statement.

Education Dept. Seeks Input on Income-Based Repayment

The U.S. Department of Education will gather a panel of higher education stakeholders early next year to write the regulations needed to carry out President Obama’s orders to expand his federal income-based repayment program for student loans. The department will announce in Wednesday’s Federal Register that it plans to hold two public hearings on the plan this fall -- one in Washington and one in Anaheim, Calif. -- before it kicks off negotiated rule making sessions next February.

Officials also said they would accept comments, written and in person, about “additional issues that should be considered for action by the negotiating committee.”

Congressional Republicans have criticized the expansion of the program as a political stunt and its potential cost to taxpayers, which the Obama administration has not publicly identified. Critics also questioned the administration’s legal authority to make the changes on its own without Congressional approval.

President Obama has asked Congress to expand his income-based repayment program, known as Pay As You Earn, in his past two budget requests. But lawmakers haven’t acted on it. Consumer and student advocates have praised the plan, which will allow an additional 5 million existing student loan borrowers to cap their monthly loan payments at 10 percent of their discretionary income and to have any remaining loan debt forgiven after 20 years.

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Consumer Group Criticizes U.S. Student Debt Collection

The federal government’s system for collecting debt from students who have defaulted on their federal student loans is poorly overseen and rife with perverse incentives for debt collection companies that harm consumers, according to a National Consumer Law Center report released Tuesday.

The report, which analyzes how the U.S. Department of Education oversees and pays the 22 companies it hires to collect defaulted debt on behalf of taxpayers, criticizes the department for not taking borrower experiences into account when doling out billions of dollars to the collection agencies. It further criticizes the incentive structure for those companies, which the group says harms borrowers.

The law center calls for the Education Department to eliminate the use of private collection agencies and explore in-house debt collection as well as increasing transparency and borrower protections. It also builds on a report released earlier this year by the department’s Inspector General.

The report is based on public records analyzed by the consumer group, which is currently in a legal dispute with the department over debt collection records. The consumer group has sued the department over it refusal to release complete documents showing how the federal government awards bonuses to debt collection companies it hires to recover defaulted student loans. 

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